U.S. Securities and Exchange Commission
Litigation Release No. 16109 / April 8, 1999
Securities and Exchange Commission v. CBT-Ohio, Ltd. Andrew P.
Bodnar, Thomas E. Buck, Michael P. Keating and Keating Advisory
Group
(N.D. Ohio Civil Action No. 5:99-CV-822
The Securities and Exchange Commission ("Commission")
announced the filing of a Complaint on April 8, 1999, in the
United States District Court for the Northern District of Ohio
against CBT-Ohio, Ltd. ("CBT-Ohio"), Andrew P. Bodnar ("Bodnar"),
Thomas E. Buck ("Buck"), Michael P. Keating ("Keating"), and
Keating Advisory Group ("Keating Advisory").
The Complaint alleges that from November 1996 through July
1997, the defendants engaged in a scheme to defraud investors and
to misappropriate money through the fraudulent offer and sale of
the unregistered securities of CBT Holding Corporation ("CBT
Holding") and CBT-Ohio. Bodnar, Buck, acting by and through CBT
Holding and CBT-Ohio, organized a salesforce comprised of certain
registered representatives, including Keating. Bodnar and
Keating, acting by and through Keating Advisory, and the others
on the salesforce solicited and induced at least 148 public
investors to purchase approximately $6.4 million of promissory
notes issued by CBT Holding and CBT-Ohio. Bodnar, Keating and
the others on the salesforce falsely portrayed the securities as
certificates of deposit yielding a 12 percent annual return and
made other misrepresentations intended to lull investors into the
false belief that the securities were safe investments. The
Complaint alleges that, in reality, Bodnar and Buck
misappropriated most, if not all, of the investor funds raised
through the sales of the CBT Holding and CBT-Ohio securities.
Bodnar and Buck used over $3 million to pay their personal living
and business expenses, and transferred another $2 million to
individuals promoting dubious investments known as "Prime Bank"
instruments. In addition, Bodnar and Buck used most of the
remaining investor funds to make principal and interest payments
to other investors who had invested in CBT Holding and CBT-Ohio
securities at earlier points in time.
The Complaint alleges that Keating and the others on the
salesforce failed to conduct any independent investigation or due
diligence on CBT Holding, CBT-Ohio and/or their securities.
Instead, they relied entirely on Bodnar for information who
provided little more than the anticipated rate of return.
Nevertheless, Keating, in particular, touted the safety of the
CBT Holding and CBT-Ohio securities. Acting through Keating
Advisory, he told investors, variously, that their funds would be
invested in a certificate of deposit issued by a so-called "world
bank;" that the rate of return was guaranteed; that the
investment was liquid; and that the securities were backed by the
"full faith and credit" of the United States. Keating knew, or
was reckless in not knowing, that these representations were
entirely false.
The Complaint alleges that CBT-Ohio, Bodnar, Buck, Keating
and Keating Advisory violated Sections 5(a), 5(c) and 17(a) of
the Securities Act of 1933 and Section 10(b)of the Securities
Exchange Act of 1934 ("Exchange Act"), and Rule 10b-5 thereunder.
The Complaint further alleges that Bodnar, Keating and Keating
Advisory violated Section 15(a) of the Exchange Act. The
Complaint seeks permanent injunctive relief, disgorgement of all
profits, together with prejudgment interest thereon and the
imposition of civil penalties.